SHANGHAI — There is an audacious economic phenomenon happening in China.
It has nothing to do with debt, infrastructure spending or the other major economic topics du jour. It has to do with cash — specifically, how China is systematically and rapidly doing away with paper money and coins.
Almost everyone in major Chinese cities is using a smartphone to pay for just about everything. At restaurants, a waiter will ask if you want to use WeChat or Alipay — the two smartphone payment options — before bringing up cash as a third, remote possibility.
Just as startling is how quickly the transition has happened. Only three years ago there would be no question at all, because everyone was still using cash.
“From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment it’s only in China,” said Richard Lim, managing director of venture capital firm GSR Ventures.
There are certain parts of the Chinese internet that have to be seen to be believed. Coming from outside the country, it’s hard to comprehend that Facebook or Google can be completely blocked until you are forced to do without them. It’s tough to fathom how critical the messenger app WeChat is for everyday life until the sixth person of the day asks to scan your QR code — a sort of bar code — to connect the two of you.
What’s happening with cash in China is similar. For the past three years, I have been outside mainland China covering Asian technology from Hong Kong, which has a very different internet culture from the mainland. I knew that smartphone payments were taking over in China, as the statistics were stark: In 2016, China’s mobile payments hit $5.5 trillion, roughly 50 times the size of America’s $112 billion market, according to consulting firm iResearch.
Even so, the attendant cultural shift was graspable only in pe...